Even a pandemic couldn’t keep the US stock market from going green last year. Stocks have built on the remarkable rally of 2020 this year and, barring a catastrophe, will end up higher for the third year in a row.
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With the major clues setting new records seemingly at will, some areas of the market are said to be as frothy as a poorly distributed beer has been in recent days. The tech sector, SPAC stocks and recent IPOs are the prime suspects.
With a growing list of highfliers, investors may start to look to underperforming names that have the makings of a comeback. A good place to find such stocks is to see what Wall Street analysts recommend in this overheated market. Here are three large caps whose ratings were recently upgraded to “buy”.
How is Walmart expected to perform in Q4?
Walmart (NYSE: WMT) has been upgraded from neutral to buy from MKM Partners. The company has set a target of $ 166 on the stock which, after the recent drop, is up 17%. MKM was one of the few holdouts on the street who didn’t give Walmart a purchase rating. Last week Goldman Sachs reiterated its Conviction Buy designation and gave the stock an extremely bullish target of $ 196.
Down 1.3% year-to-date, Walmart risks repeating its pattern of two years of rising followed by a year of falling that began in 2016. How the stock begins the new year will depend on much of Walmart’s performance during the holiday shopping season. . The world’s largest retailer is already in its third Black Friday sale and set to launch a major online sale on November 22sd with Walmart + members getting a four hour head start.
Last year, Walmart fell short of fourth-quarter earnings expectations and will have an even higher target of $ 1.49 per share to face this year. While much of the focus is on gift shopping, the willingness of consumers to pay more for generally inexpensive Walmart groceries for holiday meals will also be a major factor. Much of it also relies on Walmart’s e-commerce business, which has grown like gangbusters. Some things like supply chain constraints will be out of Walmart’s control, but overall analysts expect a strong holiday quarter and better 202.
What are the growth drivers at Tapestry?
Share of luxury goods manufacturer Tapestry (NYSE: TPR) rebounded strongly from their pandemic lows but stay away from their trading days in the 70s. A return to this price point may not be so far away.
Argus Research moved its hold note to buy on Friday. The company sees strong sales of Coach, Kate Spade and Stuart Weitzman handbags and accessories launched by holiday gift givers. After a difficult 2020 in which sales fell 18%, Tapestry’s revenue rebounded 16% in fiscal 2021. By 2022, Argus expects improvement sales and margin trends leading to 18% EPS growth.
The analyst sees several catalysts driving performance over the next year. Tapestry’s direct-to-consumer model, international expansion plans and efforts to attract young consumers are all expected to contribute to growth. The company’s increased reliance on data analytics to improve the effectiveness of marketing campaigns is also expected to lead to increased sales.
Like other high-end apparel and accessories retailers, Tapestry must continue to overcome supply chain issues and higher input costs. Until now, consumers have been willing to absorb the price increases and Argus expects this trend to continue. The 2.2% dividend yield and growth expectations of the stock make it look like a trendy investment as the new year approaches.
Is Anheuser-Busch InBev Stock a buy?
Anheuser-Busch InBev (NYSE: BUD) received a neutral upgrade to buy from Redburn Partners. The brewing giant still has mixed reviews on the streets, but sentiment has improved in recent weeks. Even the most bearish selling company, JP Morgan, has a price target that only involves a 3% drop.
The risk / reward ratio certainly seems to have changed to favorable for AB InBev. After a gloomy 2020 strongly impacted by the closures of restaurants and bars, the outlook is improving. Following a strong third quarter in which sales increased 11%, management raised its EBITDA growth forecast for the full year from 10% to 12%. This is because with many reopened recoveries, sales volumes are on the rise, as are prices.
AB InBev’s three key brands – Budweiser, Corona and Stella Artois – are leading the charge, but receiving help from other product categories. An expanded range of drinks other than beer, such as canned wine and cocktails, seltzer waters, ciders and flavored malts, have gained traction in the market as people are increasingly interested in low-alcohol or non-alcoholic options.
Analysts expect sales and profit growth to continue in 2022, but remain below pre-pandemic levels. The consensus estimate for next year’s EPS is $ 3.29, which means AB InBev shares can be held for a reasonable anticipated profit of 18 times. It’s a price that may be worth paying for a better-diverse King of Drinks who straddles the Clydesdales on a return trail.